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Investing in energy? Consider these criteria first

Short squeeze ahead for oil stocks?

Plunging oil prices have hit energy stocks hard in the last few months, but some companies have a chance at managing the fallout better than others.

Companies with low capital expenditure requirements, high free cash flows, and low-to-modest levels of debt perform best during massive oil selloffs, according S&P Capital IQ's latest energy sector report.

S&P Capital IQ examined energy stocks' performance during every month in which oil prices have plunged at least 5 percent between July 1989 and last December, Thomas Yagel, S&P Capital IQ's vice president of market development, told CNBC on Friday.

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"Companies with high CAPEX requirements and weak cash flows might have to cut back on capital outlays required to sustain or increase current production output," the report said. "Debt service may also become more challenging for companies with high debt profiles as revenues decline."

Yagel said that the most attractive energy stocks, according to S&P Capital IQ's findings, are Exxon Mobil, Imperial Oil, Occidental, BP and ConocoPhillips.

A gas price sign is seen at a Phillips 66 station in Houston, Dec. 16, 2014.
Daniel Kramer | Reuters

There are other energy analysts who agree with at least part of the findings. John Kilduff, founding partner of commodities investment management firm Again Capital, said the companies named by S&P Capital IQ are "definitely the best-positioned stocks right now because of those factors."

But he cautioned that investing in the energy sector is a risky bet right now.

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"The worst is yet to come," Kilduff said. "There are at least two to three more quarters where earnings are going to look ugly, particularly on a year-to-year basis."